FINANCIAL FACTORS INFLUENCING GROWTH OF HORTICULTURAL SECTOR IN NAKURU COUNTY, KENYA

Abstract

Agriculture as the mainstay of the Kenyan economy underscores the importance of the sub-sector to the country. Horticultural farming is arguably the second most important sub-sector in Kenyan agricultural sector. The sub-sector has been facing key challenges. Farming activities are more cost intensive compared to other forms of agribusiness. More so, ripples in the global market for horticultural produce have aggravated the situation. In respect to this, the study evaluated the financial factors influencing growth of horticultural sector in Nakuru County, Kenya. Of particular interest was the extent to which liquidity, credit access, working capital, and cash flows affected the growth of horticultural firms. The study reviewed theories of liquidity, adverse selection theory and organizational theory of growth. A crosssectional survey research design was adopted. The study targeted the 300 accounts, finance, and management staff working with the registered horticultural farms in Nakuru County. The sample size constituted 98 respondents. The study employed structured questionnaires. The research instrument was pilot tested before its administration for data collection in the main study. The rationale behind pilot testing was to assess any potential weaknesses in the research instrument. The data collected were subjected to relevant processing and analysis whereby the Statistical Package for Social Sciences (SPSS) software was used to aid in data analysis. Descriptive statistics tools including mean, mode, standard deviation and variances were used. More so, inferential statistics in form of correlation and multiple regression analyses were employed. The research hypotheses were tested at 0.05 level of significance. The findings of the study were presented in form of statistical tables. It was found that the influence of financial factors under study on growth of horticultural firms was significant. Working capital had the greatest influence on growth of firms with a beta coefficient of 0.333 followed by credit access and cash flows with a beta coefficient of 0.323 and 0.140 respectively while liquidity was the least important financial factor with a beta co-efficient of 0.030. The study concluded that horticulture firms in Nakuru County highly invested in working capital and as such it influenced the firm’s liquidity. It was inferred that horticulture firms were able to access short-term credit facilities. It was concluded that that the exchange rates affected horticulture firm’s cash flows. The study recommended that horticulture firms should have adequate liquidity in that the firms would have sufficient funds to run the operations. The study further recommends that horticulture firms should source for funds from various sources and negotiate for credit terms from such lenders as commercial banks. It is recommended that horticulture firms should effectively manage working capital. In addition, the study recommended that horticultural firms ought to ensure good cash flow management.